Webster Financial (WBS) - 2024 Q3 - Quarterly Results

Third Quarter 2024 Earnings Release Financial Highlights & Key Metrics Webster Financial Corporation reported third-quarter 2024 net income of $188.8 million, or $1.10 per diluted share, with adjusted earnings of $1.34 per diluted share, alongside solid deposit and loan growth | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net Income (to common stockholders) | $188.8 million | $222.3 million | | Diluted EPS (GAAP) | $1.10 | $1.28 | | Diluted EPS (Adjusted) | $1.34 | N/A | - CEO John R. Ciulla highlighted that the solid deposit and loan growth was a result of broad contributions across business segments and teams, achieved even in a challenging environment[1] | Highlight | Q3 2024 Value | | :--- | :--- | | Period end loans and leases | $51.9 billion (+0.7% QoQ) | | Period end deposits | $64.5 billion (+3.6% QoQ) | | Net interest margin | 3.36% (+4 bps QoQ) | | Common equity tier 1 ratio | 11.23% | | Return on average assets (Adjusted) | 1.22% | | Return on average tangible common equity (Adjusted) | 17.28% | - CFO Neal Holland noted that the company took actions to reduce CRE concentration, enhance capital, and mitigate interest rate sensitivity, all while maintaining industry-leading efficiency[2] Consolidated Financial Performance Net interest income remained stable at $589.9 million, but net interest margin compressed to 3.36% due to rising liability costs, while non-interest income decreased significantly due to securities sales and non-core operations exit | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net Interest Income | $589.9 million | $587.1 million | | Net Interest Margin | 3.36% | 3.49% | | Avg. Interest-Earning Assets | $69.8 billion | $67.1 billion | | Avg. Deposits | $62.6 billion | $59.6 billion | | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $54.0 million | $59.0 million | $36.5 million | | Net Charge-offs | $35.4 million | $33.1 million | $29.3 million | | NCOs to Avg. Loans Ratio | 0.27% | 0.26% | 0.23% | - Total non-interest income decreased by $32.7 million YoY, primarily due to a $19.6 million net loss on securities sales and a $16.0 million loss from exiting non-core operations[5] - Total non-interest expense decreased by $13.6 million YoY, mainly due to lower merger-related charges, despite increases from the Ametros addition and investments in human capital and technology[7] Balance Sheet and Capital Analysis Total assets reached $79.5 billion, driven by strong deposit growth to $64.5 billion and increased loans to $51.9 billion, while capital ratios improved despite a rise in nonperforming loans | Loan & Lease Balances (in billions) | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Commercial loans and leases | $20.1 | $19.5 | $19.7 | | Commercial real estate | $21.7 | $22.3 | $20.6 | | Residential mortgages | $8.6 | $8.3 | $8.2 | | Total Loans and Leases | $51.9 | $51.6 | $50.1 | | Asset Quality | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Nonperforming loans / Total loans | 0.82% | 0.72% | 0.43% | | Past due loans (in millions) | $108.9 | $166.3 | $70.7 | | Deposits & Capital | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Total Deposits (in billions) | $64.5 | $62.3 | $60.3 | | Loan to Deposit Ratio | 80.5% | 82.8% | 83.0% | | Common Equity Tier 1 Ratio | 11.23% | 10.59% | 11.12% | | Tangible Book Value per Share | $33.26 | $30.82 | $29.48 | Reportable Segments Commercial Banking The Commercial Banking segment's pre-tax, pre-provision net revenue decreased by 8.2% to $270.8 million due to higher funding costs, despite an increase in non-interest income and loan growth | Commercial Banking (in millions) | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $338.4 | $365.0 | (7.3)% | | Non-interest income | $33.3 | $28.8 | 15.6% | | Non-interest expense | $100.9 | $98.7 | (2.2)% | | Pre-tax, pre-provision net revenue | $270.8 | $295.1 | (8.2)% | | Balances (in millions) | Sep 30, 2024 | Sep 30, 2023 | % Change | | :--- | :--- | :--- | :--- | | Loans and leases | $40,372 | $38,849 | 3.9% | | Deposits | $17,124 | $17,166 | (0.2)% | Healthcare Financial Services Healthcare Financial Services achieved strong results with a 13.4% increase in pre-tax net revenue to $66.5 million, significantly boosted by the Ametros acquisition and substantial growth in total footings | Healthcare Financial Services (in millions) | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $93.9 | $77.7 | 20.9% | | Non-interest income | $26.5 | $20.8 | 27.6% | | Non-interest expense | $54.0 | $39.9 | (35.5)% | | Pre-tax, net revenue | $66.5 | $58.6 | 13.4% | | Key Metrics (in millions, except accounts) | Sep 30, 2024 | Sep 30, 2023 | % Change | | :--- | :--- | :--- | :--- | | Number of accounts (thousands) | 3,341 | 3,186 | 4.9% | | Deposits | $9,940 | $8,230 | 20.8% | | Total footings | $15,146 | $12,325 | 22.9% | - The acquisition of Ametros in Q1 2024 was a primary driver of growth, contributing $11.8 million to NII, $6.8 million to non-interest income, and $11.8 million to non-interest expense in the quarter[19][21] Consumer Banking The Consumer Banking segment's pre-tax, pre-provision net revenue declined by 14.2% to $114.2 million, primarily due to higher deposit rates offsetting loan and deposit growth | Consumer Banking (in millions) | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Net interest income | $202.1 | $221.7 | (8.8)% | | Non-interest income | $28.3 | $28.7 | (1.4)% | | Non-interest expense | $116.3 | $117.3 | 0.9% | | Pre-tax, pre-provision net revenue | $114.2 | $133.1 | (14.2)% | | Balances (in millions) | Sep 30, 2024 | Sep 30, 2023 | % Change | | :--- | :--- | :--- | :--- | | Loans | $11,571 | $11,219 | 3.1% | | Deposits | $27,020 | $25,869 | 4.4% | Supplementary Information This section provides standard disclosures, including forward-looking statement risks and detailed explanations of non-GAAP financial measures used for performance analysis - The report contains forward-looking statements subject to risks and uncertainties, including economic conditions, regulatory changes, interest rate fluctuations, and cybersecurity threats[29] - The company uses several non-GAAP financial measures to provide investors with useful information for understanding financial performance and trends, including adjusted EPS, efficiency ratio, ROATCE, and tangible equity ratios[32] - Key non-GAAP measures are defined as follows: - ROATCE: Net income available to common stockholders (adjusted for intangible amortization) as a percentage of average tangible common equity - Tangible Common Equity Ratio: Stockholders' equity (less preferred stock, goodwill, and intangibles) divided by total assets (less goodwill and intangibles) - Core Deposits: Total deposits less all certificates of deposit[33] Consolidated Financial Statements & Reconciliations Selected Financial Highlights This table summarizes Webster's key financial metrics over five quarters, showing trends in income, performance ratios, asset quality, capital, and per-share data | Metric | Q3 2024 | Q2 2024 | Q3 2023 | | :--- | :--- | :--- | :--- | | Diluted EPS | $1.10 | $1.03 | $1.28 | | ROA (annualized) | 1.01% | 0.96% | 1.23% | | ROATCE (annualized) | 14.29% | 14.17% | 17.51% | | Net interest margin | 3.36% | 3.32% | 3.49% | | NPLs / Total loans | 0.82% | 0.72% | 0.43% | | CET1 risk-based capital | 11.23% | 10.59% | 11.12% | | Book value per common share | $52.00 | $49.74 | $46.00 | Consolidated Balance Sheets The unaudited consolidated balance sheet shows total assets increased to $79.5 billion, supported by growth in total deposits to $64.5 billion and total loans and leases to $51.9 billion | Balance Sheet (in billions) | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Assets | | | | | Total investment securities, net | $17.2 | $16.4 | $14.5 | | Total loans and leases, net | $51.3 | $50.9 | $49.5 | | Total Assets | $79.5 | $76.8 | $73.1 | | Liabilities & Equity | | | | | Total deposits | $64.5 | $62.3 | $60.3 | | Total liabilities | $70.3 | $68.0 | $64.9 | | Total stockholders' equity | $9.2 | $8.8 | $8.2 | Consolidated Statements of Income The consolidated income statement for Q3 2024 shows net interest income of $589.9 million, but net income available to common stockholders declined to $188.8 million due to higher credit loss provisions and lower non-interest income | Income Statement (in millions) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net interest income | $589.9 | $587.1 | | Provision for credit losses | $54.0 | $36.5 | | Total non-interest income | $57.7 | $90.4 | | Total non-interest expense | $349.0 | $362.6 | | Net income available to common stockholders | $188.8 | $222.3 | Net Interest Margin Analysis The net interest margin for Q3 2024 decreased to 3.36% from 3.49% in Q3 2023, as a 35 basis point increase in the rate on total interest-bearing liabilities outpaced the 20 basis point rise in asset yields | Net Interest Margin Analysis | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Yield on total interest-earning assets | 5.69% | 5.49% | | Rate on total interest-bearing liabilities | 2.49% | 2.14% | | Net interest margin (FTE) | 3.36% | 3.49% | Loan and Lease Portfolio As of September 30, 2024, the total loan and lease portfolio stood at $51.9 billion, with Commercial Real Estate and Commercial non-mortgage being the largest components, showing strategic shifts from the prior quarter | Loan Balances (in billions) | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Commercial non-mortgage | $18.7 | $18.0 | $18.1 | | Commercial real estate | $21.7 | $22.3 | $20.6 | | Residential mortgages | $8.6 | $8.3 | $8.2 | | Total loans and leases | $51.9 | $51.6 | $50.1 | Asset Quality Details Asset quality details show nonperforming loans increased to $425.6 million, primarily in commercial non-mortgage and commercial real estate, while the allowance for credit losses stood at $687.8 million, covering 162% of nonperforming loans | Nonperforming Loans (in millions) | Sep 30, 2024 | Jun 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | :--- | | Commercial non-mortgage | $215.8 | $210.9 | $121.1 | | Commercial real estate | $150.7 | $96.3 | $31.0 | | Total nonperforming loans | $425.6 | $368.8 | $215.1 | | Allowance for Credit Losses (in millions) | Q3 2024 | | :--- | :--- | | Beginning Balance | $669.4 | | Provision | $53.9 | | Total net charge-offs | ($35.4) | | Ending Balance | $687.8 | Non-GAAP to GAAP Reconciliations This section provides detailed reconciliations of GAAP results to non-GAAP measures, adjusting reported GAAP EPS of $1.10 to an adjusted non-GAAP EPS of $1.34 for Q3 2024 | EPS Reconciliation | Q3 2024 | | :--- | :--- | | Reported Diluted EPS (GAAP) | $1.10 | | Loss on sale of investment securities | $0.08 | | Exit of non-core operations | $0.07 | | Strategic restructuring costs and other | $0.10 | | FDIC special assessment | ($0.01) | | Adjusted Diluted EPS (non-GAAP) | $1.34 | | ROATCE Reconciliation | Q3 2024 | | :--- | :--- | | Return on average tangible common stockholders' equity (GAAP) | 14.29% | | Adjusted return on average tangible common stockholders' equity (non-GAAP) | 17.28% | | Tangible Equity Ratios | Sep 30, 2024 | Sep 30, 2023 | | :--- | :--- | :--- | | Tangible equity / Tangible assets | 7.85% | 7.62% | | Tangible common equity / Tangible assets | 7.48% | 7.22% | | Tangible book value per common share | $33.26 | $29.48 |